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Infostar Ltd.'s CFO, a CA, suggests withholding a historically paid discretionary employee incentive of ₹3 crores so that profit crosses ₹1 crore and directors qualify for their bonus tier. Which statement best reflects the ethical position?
AImpermissible because non-financial metrics like staff satisfaction and attrition are increasingly material to stakeholders and the CA must act in the public interest
BImpermissible only if the Companies Act prescribes minimum bonus payments to employees
CPermissible if disclosed as a one-time cost-saving measure in the directors' report
DPermissible since the incentive is discretionary and not legally enforceable
Answer & Solution
Correct answer: A. Impermissible because non-financial metrics like staff satisfaction and attrition are increasingly material to stakeholders and the CA must act in the public interest
Although the bonus is discretionary, the motive (manipulating profit to trigger directors' bonus) and impact on non-financial performance indicators (employee satisfaction, attrition, wage gap) are material. The CA must uphold integrity and professional behaviour and not advise actions adverse to stakeholders' long-term interest.
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